REPORT 


INVESTIGATING  COMMITTEE 


THEIR 


N TED  BY  THE  STOCKHOLDERS  AT 
ANNUAL  MEETING  OCTOBER  31st.  1862. 


RUTLAND : 
PRINTED  BY  TUTTLE 
1862. 


REPORT 


OF  THE 


INVESTIGATING  COMMITTEE 


\.  I \ f I 

OF  THE 


APPOINTED  BY  THE  STOCKHOLDERS  AT  THEIR 
ANNUAL  MEETING-  OCTOBER  31st,  1862. 


RUTLAND : 

PRINTED  BY  TUTTLE  & GAY. 

1862. 


3*2.1 


At  the  Stockholders’  meeting  held  on  5th  December,  1862, 
after  the  reading  of  the  committee’s  report,  it  was  voted,  that 
the  report  be  re-committed  to  the  committee,  for  revision  and 
printing. 


l3a|on 


REPORT, 


PREAMBLE. 

Your  committee,  appointed  at  the  annual  meeting  of  the 
stockholders  of  the  Bank  of  Mutual  Redemption,  October  31, 
1862,  to  report  to  this  adjourned  meeting  any  facts  they  deem 
necessary,  and  also  a list  of  names  for  officers,  respectfully 
report,  that  they  entered  upon  the  work  with  a sole  desire  to 
serve  the  interests  of  the  Banks  they  represented.  In  taking 
the  testimony  of  the  officers  of  the  bank,  upon  the  matters 
under  examination,  they  have  endeavored  to  reconcile  slight 
differences  of  statement,  and  present  the  substance,  as  fairly 
and  clearly  as  possible.  Where  an  absolute,  and  irreconcilable 
difference  of  statement  occurs,  they  have  so  stated,  generally 
giving  their  own  views  of  the  probable  correctness  of  one,  or 
the  other  statement.  They  have  endeavored  to  act  justly,  and 
to  arrive  at  conclusions,  from  a consideration  of  the  facts,  or 
supposed  facts  presented  to  them,  only.  Representing  six 
different  States,  and  entering  upon  the  work  with  views  of  the 
previous  conduct  of  the  bank  widely  dissimilar,  they  deem  it 
no  less  remarkable  than  satisfactory  that  their  conclusions  upon 
every  subject  have  nearly  exactly  coincided,  and  that  every 
vote  taken,  or  expression  of  opinion  made,  has  been  entirely 
unanimous  from  the  beginning. 

They  have  entered  into  a somewhat  full  examination  of  the 
condition  of  the  bank,  and  its  management,  have  considered 
some  changes  of  organization,  the  relations  of  its  officers  with 
their  duties,  and  with  each  other,  and  have  prepared  a state- 
ment of  some  facts  illustrative  of  its  general  administration. 
They  have  also  suggested  the  propriety  of  making  certain 
changes  in  the  charter  of  the  bank,  and  in  the  stockholders’ 
by-laws. 


b 


4 


STATE  OF  THE  BANK. 


The  state  of  the  Bank  was,  on  the  20th  of  November,  1862, 
(the  day  the  examination  commenced,)  as  follows : 


ASSETS. 


LIABILITIES. 


Loan  to  U.  States  $2,003,000  00 

Capital  Stock, 

$561,700  00 

Notes  Discounted, 

1,100,536  53 

Dividends, 

20  00 

Suspense  account, 

672  71 

Due  Banks, 
Perm.  Deposits, 

2,968,222  56 

U.  S.  Mint, 

200  00 

76,500  00 

Due  from  Park  Bank, 

80,700  92 

Defd.  Deposits, 

32,834  03 

National  Bank, 

75,359  83 

Discount, 

2,403  13 

Girard  Bank, 

174  75 

Interest, 

16,437  76 

Other  Banks, 

42,343  63 

Exchange, 

Asst’g  and  Counting, 

949  08 

Collection  account, 

153  67 

87  27 

Boston  Bills  & Ch’ks, 

103,534  36 

Profit  and  Loss, 

12,233  99 

Foreign  Bills, 

324,074  00 

Circulation, 

118,800  00 

Expense, 

Foreign  Money  Dep. 
Specie, 

6,458  84 
119  49 
98,966  63 

Deposits, 

46,107  54 

$3,836,295  36 

$3,836,295  36 

After  a careful  and  thorough  examination  into  the  securities 
held  by  the  Bank,  we  have  made  the  following  estimate  of  its 
condition,  so  far  as  relates  to  profit  and  loss : 

Apparent  surplus  Sept.  30,  1862, $14,291  21 

Received  since  on  account  N.  Sturtevant 

& Co.,  previously  charged  to  P.  & L.  300  00 

14,591  21 

Deduct  paper  since  charged  P.  & L. . . . 3,129  68 

Deduct  Rent,  State  Tax,  &c.,  due  Oct.  1st 

and  since  paid 3,885  50  7,015  18 

Apparent  balance  of  profits  on  day  of  examination,  7,576  03 
To  this  should  be  added  the  estimated  accrued  inter- 
est on  government  securities, 25,399  55 


$32,975  58 


On  the  other  hand  we  estimate  the  losses 

on  suspended  paper, 74,070  62 

On  the  claim  against  the  Sanford  Bank, 

Maine,  ...  5,986  28 

Losses  in  Tellers  cash, 2,000  00 

Amount  required  to  re-discount  the  loan  of 

the  bank, 9,380  77 

Total, 91,437  67 

Deduct  apparent  profit  as  abovo, 32,975  58 


$58,462  09 


Probable  deficit, . . . 


5 


Since  the  organization  of  the  bank,  it  appears  that 

there  has  been  paid  in  dividends, $33,702  00 

For  interest  paid  to  Banks  to  Dec.  1,  1862, 83,008  14 

For  expenses,  (including  the  above  item  of  $83,008  14 

paid  to  Banks,) $193,569  83 

While  there  has  been  charged  for  losses  in  the  foreign 
money  department,  including  loss  by  the  Warwick 

Bank, 27,682  84 

Losses  in  loans, 57,553  12 

Total  of  losses  already  charged, 85,235  96 

If  to  this  we  add  our  estimate  of  losses  not  charged,  82,056  90 

We  have  a total  of  losses  made  during  the  four  years 

o the  existence  of  the  Bank, $167,292  86 

Or  nearly  30  per  cent  of  the  capital  stock. 

STOCKHOLDING  BANKS. 

There  are  159  stockholding  banks,  143  of  whom  are  out  of 
Boston,  and  46  keep  their  accounts  elsewhere. 

There  has  been  no  increase,  but  on  the  whole  a decrease  in 
the  number  of  banks  doing  business  with  your  bank,  since  its 
establishment,  which  we  regard  as  satisfactory  evidence  of  the 
unpopularity  of  the  management. 

FOREIGN  MONEY  DEPARTMENT. 

The  foreign  money  department  received  our  earliest  atten- 
tion. We  found  thirty-six  employees,  exclusive  of  Mr.  Blan- 
chard, the  nominal  head.  Six  of  them,  including  Mr.  Brad- 
bury, the  superintendent,  have  been  in  the  bank  from  its  com- 
mencement— five  since  1859,  four  since  1860,  two  since  1861, 
while  nineteen  have  been  employed  since  July  15th,  1862. 
The  salaries  in  this  department  are  $900  to  Mr.  Bradbury,  one 
at  $800,  three  at  $600,  six  at  $450,  and  twenty-five  at  $300 
per  annum,  beside  occasional  moderate  gratuities,  the  aggre- 
gate being  about  $14,000. 

It  appears  that  the  employment  of  so  large  a number  of 
inexperienced  hands,  occasions  unusual  losses  and  great  incon- 
venience in  this  department,  the  present  average  loss  by  bad 
money  being  about  $90  a month,  against  a previous  average 
of  $15  a month,  the  total  losses  averaging  about  $200  per 
month. 


6 


The  great  number  of  recent  resignations,  requiring  the  sub- 
stitution of  inexperienced  persons,  is  attributable  to  a variety 
of  causes : to  promotion  to  higher  salaries  in  the  Home 
Department  of  the  bank,  to  enlistments  in  the  volunteer  army 
of  the  United  States,  but  mainly  it  is  believed  to  the  absence  of 
a liberal  policy  on  the  part  of  the  bank,  -whereby  the  services 
cf  tried  and  trustworthy  employees  might  be  retained  at  a 
moderate  increase  of  salary.  The  whole  number  of  resigna- 
tions up  to  Nov.  22d,  1862,  is  seventy-two,  sixteen  of  whom 
were  promoted  to  the  Home  Department. 

It  appears  that  men  are  taken  from  the  “ Foreign  Money  ” 
to  serve  in  the  “ Home  ” department,  seriously  retarding  the 
business  on  Tuesdays  and  Fridays,  but  not  materially  on  other 
days.  This  has  been  especially  true,  since  the  expulsion  of  the 
Bank  from  the  Clearing  House,  since  which  time  a clerk  on  a 
salary  of  $400,  and  giving  no  bonds,  (belonging  to  the  Home 
Department,)  receives,  opens,  separates,  and  sends  to  this 
department  the  larger  proportion  of  the  packages  from  other 
banks,  amounting  to  hundreds  of  thousands  of  dollars  daily,  as 
also  the  return  packages  from  the  Foreign  Money  Department 
for  delivery  to  expresses.  Meanwhile  Mr.  Blanchard,  whose 
bonds  are  given  for  the  safe  custody  of  these  very  packages, 
and  whose  especial  province  it  is  to  receive  and  dispatch  them, 
is  engaged  in  attending  to  the  wholly  unnecessary  business  of 
clearing  from  bank  to  bank. 

The  business  of  this  department  is  usually  closed  from  5 to 
7 o’clock — rarely  as  early  as  5,  and  not  unfrequently  from 
9 to  10£  o’clock.  These  late  hours  render  it  impossible  to 
make  a recount  for  the  purpose  of  discovering  an  error,  with- 
out employing  the  hands  far  into  the  night,  and  incapacitating 
them  for  work  on  the  following  day.  It  is  the  opinion  of  the 
committee  that  a method  could  readily  be  devised  for  simplify- 
ing the  business  of  this  department,  so  that  the  work  could  bo 
finished  at  a much  earlier  hour. 

There  appears  to  be  no  responsible  head  for  this  most  impor- 
tant department  at  present.  The  nominal  head,  who  gives 
bonds,  is  engaged  in  another  department;  the  superintendent 
gives  no  bond. 


7 


It  appears  that  the  President  is  not  in  the  habit  of  confer- 
ring with  the  superintendent,  or  the  nominal  “ head  ” of  the 
department,  nor  do  those  officers  advise  with  each  other  con- 
cerning its  internal  arrangement  or  general  management ; that 
the  nominal  head  does  not  consider  himself  responsible  for 
losses,  except  such  as  occur  at  his  desk  in  the  Home  Depart- 
ment, and  during  his  presence.  The  loss  of  a package  of 
$1700  from  his  desk  recently,  occurred  when  his  clerk  was  in 
charge. 

Your  committee  were  astonished  at  the  apparent  want  of 
organization  in  this  department,  and  feel  assured  that  a very 
large  proportion  of  the  enormous  losses  which  have  occurred 
could  have  been  prevented  by  precautions  which  would  suggest 
themselves  to  the  most  casual  observer. 

CLEARING  HOUSE. 

Your  committee  regard  the  absence  of  this  bank  from  the 
Clearing  House,  to  be  a serious  disadvantage.  One  important 
advantage  of  that  system  is  thus  stated  by  your  President,  in 
his  letter  of  July  28th,  1858.  “The  object  of  the  Clearing 
House  will  be  * * measurably  defeated  by  the 

exclusion  of  any  one  (bank)  in  good  standing.  Now  any 
bank  excluded  will  have  to  make  thirty-seven  exchanges  instead 
of  one,  and  each  of  the  thirty-seven  banks  will  have  to  make 
two  instead  of  one.  The  exclusion  of  a good  bank,  therefore, 
can  do  no  good  to  the  rest,  will  make  them  some  additional 
trouble,  and  they  will  not  get  what  they  supposed  they  bar- 
gained for,  when  they  established  this  labor  saving,  and  trouble 
saving  machine.” 

While  a member  of  that  institution,  one  man  was  employed 
in  effecting  exchanges  for  one  and  one-half  hours.  It  now 
requires  the  services  of  from  five  to  eight  clerks,  from  nine  A. 
M.  to  1 P.  M.  daily.  The  risk  of  loss  is  immeasurably  greater 
in  consequence  of  the  number  of  men  entrusted  with  packages 
of  money,  one  clerk  not  under  bonds  taking  $50,000  daily  into 
the  street  for  exchange.  This  arrangement  involves  great  loss 
of  time  and  confusion  in  the  bank  itself. 

Application  has  recently  been  made  to  have  the  vote  expelling 


8 


the  bank,  reconsidered,  which  failed,  and  we  are  assured  that 
the  bank  will  not  be  permitted  to  return,  while  under  the  pres- 
ent presidential  management. 

ANTICIPATING  PAYMENTS  ON  PAPER. 

It  appears  that  money  has  been  paid  out,  on  the  verbal 
order  of  the  president,  a day  before  the  paper  on  which  such 
payment  was  made,  was  come  into  possession  of  the  bank. 

This  statement  was  made  at  the  annual  meeting,  and  appears 
to  be  sustained,  though  it  does  not  appear  that  any  loss  has 
occurred  to  the  bank,  in  consequence  of  this  practice. 

LOWELL  SAYINGS  INSTITUTION. 

Your  committee  find  that  the  Lowell  Institution  for  Savings, 
of  which  your  President  is  the  Treasurer,  has  had  a deposit 
since  July  7th,  1859,  at  five  per  cent.,  until  July  1,  1862, 
when  the  rate  was  changed  to  four  per  cent,  on  the  entire  bal- 
ance, while  stockholding  banks  were  receiving  considerably  less 
than  three  per  cent,  on  their  average  deposits,  and  while  the 
Bank  of  Mutual  Redemption  was  receiving  on  its  heavy  New 
York  balances  but  four  per  cent.,  and  since  July  1st  but  three 
per  cent.  Your  President  positively  testified  that  this  arrange- 
ment was  authorized  by  the  directors.  Every  member  of  the 
board,  on  the  other  hand,  was  confident  that  the  matter  had 
never  been  brought  to  their  knowledge.  A member  of  the 
standing  committee  did,  however,  understand  that  a temporary 
loan  was  made  for  the  purpose  of  taking  another,  at  a higher 
rate  of  interest,  but  supposed  that  the  arrangement  terminated 
with  the  payment  of  the  loan  made  by  the  bank,  and  now  for  the 
first  time  learned  that  it  had  been  continued  to  the  present 
date.  The  President  subsequently  modified  his  testimony, 
stating  that  the  standing  committee  were  his  advisers  in  making 
the  arrangement,  but  that  all  the  directors  were  informed  of  it. 
The  amount  of  this  deposit  has  been  subject  to  great  and  sud- 
den, though  not  frequent  fluctuations,  varying  in  amount  from 
$8,000  to  $152,000,  and  the  total  amount  of  interest  paid 
thereon  to  November  15th,  1862,  is  $16,944  89,  being 
nearly  $7000  more  than  would  have  been  paid  to  several  stock- 


k 


9 


holding  banks,  for  the  same  deposit,  and  $14,452  14  more 
than  a single  stockholding  bank  would  have  received. 

DEFICIT  IN  SPECIE. 

Section  9 of  the  charter  of  the  bank  reads,  “ said  bank 
shall  always  show  in  its  weekly  returns  at  least  ten  percent,  of 
its  capital  stock  paid  in,  in  current  gold  or  silver  coin,  and  it 
shall  be  the  duty  of  the  bank  commissioners,  should  said  bank- 
violate  this  provision,  to  apply  to  the  nearest  J udge  of  the 
Supreme  Judicial  Court  for  an  injunction  on  said  bank. 

From  December,  I860,  to  November,  1861,  a period  of 
forty-one  weeks  the  bank  violated  this  provision  of  its  charter, 
and  was  continually  liable  to  injunction,  closing  on  several 
occasions  with  less  than  $10,000,  and  on  one  occasion  with 
$7,814  of  specie  in  its  vaults.  This  deficiency  continued  con- 
trary to'  the  wishes  and  direction  of  the  standing  committee, 
and  until  the  directors  passed  a vote  requiring  the  president  to 
keep  not  less  than  $100,000  on  hand. 

The  President  has  sole  control  of  the  movement  of  specie, 
and  his  explanation  is  that  though  previously  familiar  with  this 
provision  of  the  charter,  ii  had  completely  escaped  his  recol- 
lection for  the  period  referred  to,  and  until  his  attention  was 
called  to  the  fact  by  the  bank  commissioners. 

SPECIE  LOANS. 

Loans  of  specie  have  recently  been  made  to  at  least  one  coun- 
try bank,  appearing  as  its  property  during  four  days  of  the  week, 
and  that  of  the  Bank  of  Mutual  Redemption  for  the  other  two 
business  days,  thus  enabling  both  banks  to  include  the  same 
specie  in  their  returns.  The  gold  did  not  in  the  case  alluded 
to,  leave  the  vaults  of  this  bank. 

Your  committee  regard  this  practice  as  reprehensible,  and 
consider  that  statements  based  upon  such  partial  ownership,  a 
fraud  upon  the  public,  and  an  evasion  of  the  law.  The  decis- 
ion of  Judge  Bigelow  in  regard  to  this  practice  is  so  recent 
and  so  fresh  in  the  mind  of  the  President  of  this  bank,  that  it  is 
quite  impossible  that  it  should  have  been  overlooked  or  forgotten. 

The  President  attempted  to  justify  this  practice,  maintaining 
that  it  is  in  accordance  with  the  principles  of  sound  banking. 


10 


CUSTODY  OF  BILLS. 

Section  14  of  Directors’  By-Laws  place  “all  bills,  not  needed 
for  the  business  of  the  day,  in  the  custody  of  the  cashier,”  who 
is  consequently  responsible  for  all  such  bills.  No  bills  are,  or 
have  been  in  his  custody  except  for  signing,  but  all,  including 
mutilated,  remain  in  the  teller’s  cash  until  destroyed. 

MUTILATED  BILLS  DESTROYED. 

On  the  24th  day  of  September,  1862,  the  standing  commit- 
tee, consisting  of  three  directors  with  the  President,  wTere 
authorized  to  burn  the  mutilated  bills  of  the  bank.  On  the 
13th  of  October,  one-lialf  of  this  committee,  to  wit ; the  Presi- 
dent and  one  director,  without  the  presence  or  knowledge  of 
the  cashier,  who  was  the  only  legal  custodian,  destroyed  by 
burning,  $81,000  of  the  mutilated  bills  of  the  bank.  In  jus- 
tice to  the  board  of  directors,  it  is  proper  to  state  that  when 
this  extraordinary  proceeding  was  brought  to  their  knoAvledge, 
they  unanimeusly  expressed  their  disapproval. 

CUSTODY  OF  SECURITIES. 

The  custody  of  nearly  three  millions  of  securities,  more  than 
one-third  of  which  is  in  government  stocks,  payable  to  bearer, 
is  intrusted  to  the  discount  clerk,  whose  salary  is  $1000,  and 
whose  bonds  arc  $8000.  This  experienced,  and  your  commit- 
tee believe,  able  and  trustworthy  officer,  does  not  regard  himself 
as  responsible  for  the  custody  of  this  immense  sum,  nor  does 
the  cashier  except  when  locked  in  his  vault  at  night. 

BORROWING  AND  LENDING. 

It  appears  that  your  bank  is  a constant  and  enormous  bor- 
rower on  the  street,  caused,  it  is  believed,  by  the  habit  of  lend- 
ing largely  and  closely,  without  regard  to  impending  debtor 
balances. 

While  it  is  undoubtedly  necessary  for  any  bank  organized  as 
this  is,  to  borrow,  to  meet  inevitable  losses  in  clearing,  yet  your 
committee  regard  the  habitual  borrowing  and  lending  of  largo 
sums  daily  as  inexpedient  and  unprofitable,  tending  to  impair 


11 


the  confidence  of  the  banking  community  in  the  standing  and 
conservative  management  of  the  hank. 

It  is  their  opinion  that  the  stockholding  hanks  would  prefer 
a conservative  administration,  and  an  approach  to  absolute 
security,  to  the  slight  profits,  if  any,  arising  from  this  objection- 
able policy. 

CAPITAL  STOCK. 

The  board  of  directors  regard  it  as  very  desirable  that  the 
capital  stock  of  the  Bank  be  increased,  as  speedily  as  possible, 
to  at  least  a million  of  dollars.  The  President  regards  it  as 
u fortunate  that  the  capital  is  no  larger.”  There  has  also  been 
as  radical  a difference  of  opinion  between  the  President  and 
the  other  members  of  the  board,  as  to  the  policy  of  keeping 
specie  reserves,  as  to  the  duties  and  responsibilities  of  the 
cashier,  as  well  as  upon  the  quality  of  paper  bought  by  the 
Bank.  The  directors  regarding  the  President’s  administration 
as  marked  by  an  over  anxiety  to  secure  dividends  to  stockhold- 
ing banks,  resulting  in  the  purchase  of  weaker  paper,  at  higher 
rates  of  interest,  rather  than  undoubted  bills  at  the  prevailing 
low  rates. 

DISCOUNTS  BY  PRESIDENT. 

It  appears  from  the  record  that  very  large  sums,  amounting 
in  the  aggregate  to  hundreds  of  thousands  of  dollars  have  been 
discounted  mainly  by  the  President  alone,  inasmuch  as  the 
only  consulting  director  was  interested  in  the  paper,  and  con- 
sequently disqualified  to  act.* 

OFFERING  BOOK. 

The  law  of  the  Commonwealth,  requiring  an  offering  book 
to  be  kept,  upon  which  shall  be  entered  all  paper  offered 
whether  approved  or  rejected,  has  not  been  complied  with  for 
the  past  three  years. 

*Note. — Since  the  reading;  of  this  report  in  the  stockholders’  meeting,  the 
director  referred  to  explains,  that  he  did  not  authorize  the  use  of  his  name  on 
the  record,  as  approving  the  paper.  It  was  simply  offered  by  him,  which 
seems  to  have  been  construed,  (perhaps  very  properly,)  by  the  President,  as  a 
virtual  approval.  This  explanation,  while  it  entirely  exhonerates  the  director, 
does  not  in  the  estimation  of  the  committee  affect  the  position  of  the  President. 


12 


cashier’s  position. 

It  appears  that  the  cashier  has  never  seen  the  directors’ 
record ; has  never  read  the  directors’  by-laws,  one  of  which 
sets  forth  at  great  length  the  duties  of  his  office ; and  has 
never  been  made  acquainted  in  any  way  with  the  specific 
requirements  of  that  law.  There  is  however  a positive  contra- 
diction on  this  point,  between  the  president  and  cashier. 

The  President  states  that  prior  to  his  engagement,  the  cash- 
ier accompanied  him  to  Lowell,  was  furnished  with  a copy  of 
this  by-law,  and  remained  during  the  night.  During  the  con- 
versation,the  cashier  thought  he  could  do  all  that  was  required 
of  him  by  the  by-law. 

The  cashier,  on  the  contrary  states,  that  he  accompanied  the 
president  to  Lowell,  for  the  purpose  of  conversation  ; that  he 
was  employed  while  there  in  directing  circulars  ; that  no  draft 
or  copy  of  the  by-law  was  furnished  him,  or  alluded  to  in  any 
maimer,  and  that  lie  was  at  his  home  in  Roxbury  at  seven 
o’clock,  P.  M.  As  there  is  no  collateral  evidence,  and  inas- 
much as  the  cashier  has  not,  and  evidently  has  not  been 
expected  to,  perform  the  duties  prescribed  by  the  law,  your  com- 
mittee regard  it  as  most  probable  that  his  recollections  are 
correct. 

The  president  never  consults  with  the  cashier,  in  regard  to 
loans,  discounts,  or  any  other  business  ol  the  Bank  ; and  in 
but  one  single  instance,  with  regard  to  the  appointment  of 
subordinuce  officers. 

it  appears,  that  in  an  investigation  of  large  losses  in  the 
foreign  money  department,  the  testimony,  the  results,  and  the 
officers  implicated  were  retained  from  the  knowledge  of  tho 
cashier.  Tho  examination  was  made  by  the  president,  one 
director  and  a detective,  the  assistant  book  keeper,  acting  as 
recording  clerk  ; one  other  director  being  present  at  tho  closo 
of  the  investigation. 

When  withdrawals  of  deposits  from  U.  S.  Sub-Treasury  arc 
made,  tlic  interest  is  received  in  gold.  By  order  of  the  pres- 
ident tho  cashier  directed  tho  teller  to  retain  tho  gold  “ it  not 
being  the  policy  of  tho  Bank  to  sell  specie.”  Within  a few 


13 


days  this  policy  was  reversed,  and  notice  thereof  was  commu- 
nicated through  a subordinate  officer  to  the  teller,  without  the 
knowledge  of  the  cashier,  who  was  only  accidentally  made 
aware  of  it.  This  course,  and  the  uniform  policy  of  which  it 
is  an  example,  is  in  the  opinion  of  your  committee  calculated 
to  unduly  lessen  the  legitimate  importance  and  dignity  of  the 
cashier,  the  president’s  co-ordinate  in  the  management  of  the 
interior  affairs  of  the  Bank,  and  the  proper  channel  through 
which  directions  to  subordinates  should  pass. 

The  exclusion  of  the  cashier  from  a knowledge  of  the  policy 
and  proceedings  of  the  board  of  directors,  and  from  the  confi- 
dence of  the  president,  cannot,  your  committee  believe,  be 
otherwise  than  injurious  to  the  best  interests  of  the  Bank.  It 
appears  from  the  evidence,  that  had  there  been  a full  consulta- 
tion between  the  president,  cashier  and  directors,  such  as  exists 
in  nearly  all  large  banks,  the  heavy  losses,  amounting  to  nearly 
$35,000,  by  Noah,  Sturtevant  & Co.,  probably  would  not  have 
occurred. 


cashier’s  check. 

About  three  years  since,  your  cashier  placed  his  check,  for 
between  two  and  three  hundred  dollars,  in  the  sundries  of  the 
teller’s  cash,  and  drew  the  amount  from  the  bank,  in  anticipa- 
tion of  his  salary.  Your  cashier  states  that  this  custom  had 
prevailed  in  the  bank  where  he  had  been  previously  employed  ; 
that  before  doing  so,  he  had  consulted  the  president  with  re- 
gard to  its  propriety,  and  received  his  permission,  or  approval. 

The  president  states  that  he  simply  authorized  the  cashier 
to  draw  against  his  earned  salary,  but  in  advance  of  the  reg- 
ular day  of  payment.  Finding  the  check  in  the  teller’s  draw- 
er, he  called  the  cashier’s  attention  to  it,  expressed  his  disap- 
proval, and  it  was  taken  up  that  day.  The  president  stated 
that  there  were  several  checks, — the  testimony  of  the  cashier 
and  paying  teller  agrees,  that  there  was  but  one. 

Your  committee  regard  this  practice  as  highly  improper,  and 
liable  to  great  abuse,  and  that  it  ought  not  to  be  permitted  to 
any  officer,  under  any  circumstances  whatever. 


14 


CASHIER. 

Your  Committee  think  that  the  cashier  ought  to  be  censured, 
for  not  enquiring  fully  as  to  his  duties,  and  performing  them 
fearlessly  and  faithfully  according  to  the  by-laws.  They  how- 
ever bear  willing  testimony  to  his  faithfulness  and  industry. 

Your  committee  are  only  quoting  from  high  authority  in  say- 
ing that  the  cashier  is  regarded  as  the  direct  guardian  and 
trustee  of  the  stockholders,  and  if  the  president  or  directors 
attempt  to  use  the  funds  of  the  bank,  for  improper  or  hazard- 
ous purposes,  he  may  authoritatively  interfere.  He  may  object 
to  any  measures  which  he  may  regard  as  injurious  to  the  char- 
acter or  business  of  the  bank,  without  endangering  the  tenure 
of  his  office,  and  without  offence  to  his  superiors,  and  he  is 
their  co-ordinate  in  the  administration  of  affairs. 

Situated  as  your  cashier  has  been,  possessing  no  knowl- 
edge of  the  proceedings  of  directors,  not  consulted  and  re- 
buffed by  the  president,  when  he  has  tendered  even  a sugges- 
tion, having  no  access  to  the  records,  and  in  positive  ignorance 
as  to  his  own  rights  and  duties,  the  stockholders  could  not 
of  course  expect  him  to  represent  them,  or  to  do  more  than 
faithfully  obey  the  orders  of  his  superiors. 

CHANGES  IN  CHARTER  AND  BY-LAWS. 

In  section  3d,  Directors1  By-Laws,  authority  is  given  to  the 
president  and  two  directors,  or  to  any  three  directors, to  discount 
paper  on  Wednesday  and  Saturday  of  each  week.  Also,  that 
discounts  may  be  made  at  any  other  time,  by  said  president 
and  directors.  Also  that  the  president  may  make  such  dis- 
counts without  such  directors,  the  transaction  being  of  course 
reported  to  the  next  succeeding  meeting  for  discounts. 

Your  committee  urge  that  this  law  bo  amended,  by  requir- 
ing two  regular  days  for  discount,  and  the  approval  of  at  least 
three  directors  beside  the  president,  to  any  loans,  discounts  or 
investments,  prior  to  the  transaction. 

It  is  not  to  be  overlooked  that  the  president  of  this  bank  is 
not,  and  cannot  be  a stockholder,  except  indirectly.  That  his 
interest  is  consequently  limited  to  the  salary  lie  receives,  and 
the  credit  and  standing  given  him  by  his  position.  The  strong 


15 


motive  of  large  personal  interest  in  gains  and  losses  existing  in 
the  case  of  presidents  who  are,  as  is  usual,  large  stockholders 
themselves,  cannot  exist.  The  bank  is  the  custodian  of  the 
reserves  of  one  hundred  and  thirty-five  New-England  banks, 
and  its  management  cannot  in  view  of  the  unusually  diversified 
and  important  interests  it  represents,  be  too  carefully  guarded. 

Section  3d  of  the  Charter  of  the  bank  requires  that  there 
shall  not  be  more  than  thirteen  directors,  and  that  three-fourths 
of  them  shall  be  inhabitants  of  Massachusetts,  consequently  the 
\ banks  of  two  New-England  states  must  remain  unrepresented 
in  the  board,  as  Maine  and  New-Hampshire  now  are.  To  re- 
move this  objection,  your  committee  recommend  the  passage  of 
the  annexed  resolution. 

Resolved , That  the  directors  be  instructed  to  petition  the  gen- 
eral court  of  the  commomvealth  of  Massachusetts  for  such  an 
amendment  to  the  charter  of  the  Bank  of  Mutual  Redemption, 
as  shall  secure  to  each  of  the  New-England  states  one  mem- 
ber of  the  board  of  direction  of  said  bank. 

Your  committee  also  recommend  for  obvious  reasons,  the  pas- 
sage of  the  following  resolution  : 

Resolved , That  the  directors  be  instructed,  in  calling  the 
next  annual  meeting  of  stockholders  to  propose  such  amend- 
ment to  the  by-laws  as  shall  make  it  the  duty  of  the  stockhold- 
ers committee,  provided  for  in  article  2d,  to  nominate  and  re- 
port to  each  annual  meeting,  a list  of  directors  for  the  year 
ensuing,  of  whom  at  least  three  shall  not  have  been  upon  the 
board  of  directors  for  the  current  year. 

PRESIDENT. 

It  is  the  unanimous  conclusion  of  your  committee,  based  up- 
on the  uniform  character  of  the  testimony  taken,  that  there 
has  been  on  the  part  of  the  president  of  the  bank,  in  his  inter- 
course with  the  cashier  and  subordinate  officers,  such  unusual 
reticence,  severity  of  manner  and  withholding  of  confidence, 
as  to  impair  the  efficient  and  harmonious  working  of  the  bank. 

In  his  intercourse  with  the  business  world,  we  find  a dispo- 
sition to  adhere  to  technical  points  of  difference,  regardless  of 
the  irritating  nature  of  the  subject,  an  unvarying  disposition  to 


16 


engage  in  controversy,  and  to  pursue  it  to  the  bitter  end,  an 
absence  of  those  amiable  qualities,  which  render  the  contact  of 
business  men  agreeable,  and  hence  often  profitable. 

The  absence  of  a general  feeling  of  friendliness  toward  the 
© © 

president,  which  we  find  prevailing  in  financial  circles  has  not 
resulted  in  profit  to  the  bank,  as  instanced  by  the  expulsion 
from,  and  refusal  to  re-admit  to,  the  Clearing  House  Associa- 
tion ; the  opposition  being,  as  your  committee  are  assured,  not 
to  the  bank,  but  to  its  president. 

It  is  also  the  opinion  of  your  committee,  that  the  president 
has  shown  a remarkable  want  of  tact,  in  the  organization  of  the 
internal  machinery  of  the  bank,  particularly  of  the  all-import- 
ant foreign  money  department,  and  its  connection  with  the 
home  department. 

NOMINATION. 

In  view  of  the  testimony  before  it,  and  of  the  facts  which 
have  been  developed  in  this  investigation,  some  of  which  it 
might  be  detrimental  to  the  interests  of  the  Bank,  in  relation 
to  its  claims  on  over  due  paper  to  expose,  your  committee  have 
come  to  the  unanimous  conclusion  that  it  is  their  duty  to  rec- 
ommend a change  in  the  presidency  of  the  Bank. 

While  freely  conceding  to  the  incumbent  a marked  ability  in 
many  respects,  they  do  not  hesitate  to  say  that  in  their  opinion 
the  interests  of  the  institution  demand  his  removal. 

They  have  nominated  as  one  of  your  directors,  with  the 
expectation  that  if  chosen  he  will  succeed  to  the  presidency, 
the  Hon.  Wm.  D.  Forbes,  at  present,  and  for  the  past  lour 
years  one  of  the  bank  commissioners  of  this  state.  The  re- 
markable ability  shown  by  him,  in  connection  with  the  duties 
of  that  office,  and  the  unqualified  recommendations  of  many 
gentlemen  of  great  experience  in  Bank  affairs,  as  well  as  long 
and  familiar  acquaintance  with  that  gentleman,  enabling  them 
to  judge  of  his  peculiar  fitness  for  the  position,  have  entirely 
satisfied  us,  that  in  securing  his  services  as  president,  the  bank 
will  be  truly  fortunate. 

In  completing  the  ticket  for  directors,  your  committee  deem 
it  proper  to  state  that  they  were  informed  that  Messrs.  Kurus- 


17 


worth  and  Chapin  declined  a re-election,  and  they  nominate  in 
place  of  Mr.  Chapin,  Horatio  N.  Case,  Esq.,  President  of 
the  Pynchon  Bank,  Springfield,  Mass.  They  have  strenu- 
ously urged  the  President  of  the  National  Bank  of  this  city,  to 
take  the  place  of  Mr.  Farnsworth,  but  he  declined  on  account 
of  prospective  absence  from  the  country  for  a season,  and  we 
also  failed  to  induce  another  director,  of  the  same  bank,  to 
accept. 

We  have,  therefore,  place  upon  the  ticket  a representative 
of  another  bank,  John  N.  Turner,  Esq.,  President  of  the 
Elliot  Bank. 

Thomas  W.  Peirce,  Esq.,  having  declined  re-election  at  the 
meeting  of  December  5th,  we  have  placed  upon  the  ticket 
Samuel  Hall,  Esq.,  President  of  the  Maverick  Bank. 

In  accordance  with  your  instructions  they  nominate  as 
Directors  for  the  ensuing  year : 

Franklin  Nichols,  President,  Thames  Bank,  Norwich,  Conn. 

Henry  P.  Hickok,  President,  Merchants  Bank,  Burlington  Yt. 

Stephen  N.  Mason,  Director,  Globe  Bank,  Woonsocket,  R.  I. 

John  Gardner,  Director,  Shawmut  Bank,  Boston,  Mass. 

Francis  M.  Johnson,  President,  Mount  Wollaston  Bank,  Quincy,  Mass. 

John  N.  Turner,  President,  Eliot  Bank,  Boston,  Mass. 

Horatio  N.  Case,  President,  Pynchon  Bank,  Springfield,  Mass. 

Francis  II.  Dewey,  Director,  Mechanics  Bank,  Worcester,  Mass. 

Elijah  W.  Upton,  Director,  Warren  Bank,  South  Danvers,  Mass. 

Jacob  H.  Loud,  President,  Old  Colony  Bank,  Plymouth,  Mass. 

George  W.  Thayer,  President,  Exchange  Bank,  Boston,  Mass. 

William  D.  Forbes,  Stockholder,  Blackstone  Bank,  Boston,  Mass. 

Samuel  Hall,  President,  Maverick  Bank,  Boston,  Mass. 

and  for  a stockholders  committee, 


John  B.  Page,  Vermont. 

John  A.  Appleton,  Massachusetts. 
Joseph  H.  Smith,  New  Hampshire. 
Joseph  Titcomb,  Maine. 

E.  C.  Scranton,  Connecticut. 

Seth  Padelford,  Rhode  Island. 


All  of  which  is  respectfully  submitted  by 
JOHN  B.  PAGE,  of  Vermont, 

ISAAC  REED,  of  Maine, 

W.  D.  BEASOM,  of  New  Hampshire. 

A.  G.  HAMMOND,  of  Connecticut, 

R.  R.  HAZARD,  Jr.,  of  Rhode  Island. 


WILLIAM  B.  HALE, 
C.  R.  RANSOM,  | 
Boston,  December  5th,  1862. 


of  Massachusetts. 


Com- 

mittee. 


i 


Note. — The  Stockholding  Banks  are  reminded  that  their 
Annual  Meeting  stands  adjourned  to  Friday,  the  9th  of  Janu- 
ary, at  12  o’clock,  M.  It  is  important  that  each  Bank  should 
he  represented  by  its  delegate,  as  provided  in  the  following 
by-laws : 

ARTICLE  VII. 

In  all  cases  where  the  word  Stockholder,  or  Stockholders 
occurs  in  these  By-Laws,  as  being  present  at  meetings,  it  shall 
be  held  to  mean  the  Delegate  or  Delegates  representing  a 
stockholding  Bank  or  Banks  ; and  a copy  of  the  vote  of  the 
Directors  of  the  Bank  appointing  a delegate,  attested  by  the 
Cashier  or  Presidentof  said  Bank,  shall  be  a prima-facie  evi- 
dence of  his  right  to  act  and  vote  for  said  Bank. 

ARTICLE  XIII. 

In  all  cases  where  any  Bank  votes  by  Delegate,  after  the 
choice  of  the  first  Board  of  Directors,  or  where  any  act  is  done 
or  performed  by  legal  representation  of  any  description,  the 
person  or  persons,  proposing  so  to  act,  shall  before  proceeding 
to  act,  file  with  the  Cashier' documentary  evidence  satisfactory 
to  the  Board  of  Directors,  of  such  person  or  persons’  authority 
so  to  act:  provided  that  the  Directors  may,  under  special  cir- 
cumstances, dispense,  by  vote,  with  this  requirement  if,  in 
their  judgment,  it  is  expedient  to  do  so. 


fS  V. 


life 


